When a home is sold for less than the amount owed to the bank, and the bank accepts the lower amount in satisfaction of the debt, the home is said to have 'sold short'. If you are buyng a home that is being sold short you should be prepared to be very, very patient. There is an additonal factor in the negotiations, the bank. The bank must approve the amount and the terms of the sale and they are completely overwhelmed with short sales at the moment so they sometimes move very, very slowly as they try to recover as much of their money as possible. In fact, the deal may not close at all and you will have wasted a good deal of time. The entire banking industry is quite dysfunctional at the moment and it can be very, very frustrating dealing with them. That's the downside, the upside is that you can usually get a very good deal on a short sale home because the majority of buyers just will not take the risk.
If you are selling your home short you first of all need to find a realtor who is very familiar with the process and very experienced, or that at the very least has a support system, a broker or mentor who IS experienced. These are delicate and complicated negotiations and you need to be sure your agent understands that YOU are their client and not the bank, but you really need a realtor, DO NOT try to do this on your own. You need someone looking out for YOUR best interests, not their own and not the banks. There are many stumbling blocks and pit falls along the way to a successful short sale. A realtor knows what to look for and how to avoid them.